'A Labour victory would further damage the fiscal credibility of the UK given their reputation for loose fiscal policy, at a crucial juncture given the need for a credible plan to bring down the budget deficit.'
The pound hit a 24-year low of $1.35 last year in the worst depths of the recession.
Nick Beecroft, of Saxo Bank, said: 'This morning we have witnessed what can justifiably be called the beginnings of sterling's collapse.
'So long as the markets could harbour some hope that the next government, in only three months time, would be a fiscally prudent, business-friendly Conservative one that would act swiftly to reduce the UK deficit and borrowing mountains, the pound was able to just about hold its own against the euro - but today the dam burst and it could not even do that.'
Chris Turner, head of foreign exchange strategy at investment bank ING, said: 'Despite protestations to the contrary, the UK is struggling to avoid comparisons to Greece and fears of a debt downgrade are stalking the pound.
'The market remains fearful that minority governments will struggle to quickly address the budget deficit.'
The Tories' deployment of Mr Clarke - one of the party's 'big beasts' - to attack the Government's record is an acknowledgement that their campaign has so far focused too narrowly on David Cameron and George Osborne.